Are Canadians overly optimistic about debt?

In a recent study by BMO Financial Group, Canadians are optimistic about paying off debt and half expect to be debt free by 2017.  With all the news about increasing debt level and all the economic troubles debt has created is this really possible?

It depends on who you are

Being debt free is already a reality for some.  In fact this study suggests that 26% of Canadians are already debt free.

For others, like a young couple with a new marriage, a new house, a new car, new kids and relatively new jobs, being debt free may seem like a lifetime away.

That being said, there may be others who clearly can see the finish line to being debt free.  One example might be a baby boomer couple who are now at the peak of their income potential.  Their kids have left and as a result, their expenses have dropped.  Their retirement is just a few years away and paying down debt is a real priority.  I’ve seen people paying off $10,000 to $50,000 per year in these periods prior to retirement.

And then there’s the already retired who is mortgage free but is still working part time to get our of the house but also make a little money to pay off the last of the line of credit.

Studies are a dime a dozen.

If you think about it, there are so many studies these days.  In fact there’s a study to prove any point you want.  This particular study was based on an online survey of 1507 people over a 3 day period so does it really accurately represent the reality of all Canadians?  Do the results really matter?

If this study motivates just one person to pay off his or her debts faster then it makes it all worthwhile but other than that, be careful about the headlines and what these studies are suggesting.

Putting the ‘personal' in personal finance

Remember that personal finance is truly personal.  It does not matter how much debt other people have.  It does not matter how quickly or slowly other people are planning to pay off debt.  Some people may be a great position to be debt free by 2017 while others won’t.  The ONLY thing that matters is your debt and how it affects your life.  Which camp do you belong in?

If you have too much debt, figure out strategies to pay it down.  If you have no debt, pat yourself on the back and go back to enjoying your life.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

6 Responses to Are Canadians overly optimistic about debt?

  1. My husband and I are in our mid forties and we are debt free except for our leverage for investment purpose. We somehow manage to pay off $30k to $50k annually. Yet people making more money than us can’t. It’s all about lifestyle choices and determination to be debt free. My brother in law has almost $700k debt incl mortgage and yet doesn’t feel the urgent need to pay them off – still vacationing and eating out, enjoying life. If we the frugal ones’ goal is to save responsibly so that we one day can be millionnaires, well guess what, my brother in law is already there living the lifestyle of a millionnaire! Who wins?

  2. Well said Jim. I like a good study as much as anyone, but they’re only useful if we can find a way to apply them to our personal situation or to solve a larger social problem.

  3. It does seem true that people approach debt differently based on what phase they are in during their life. However, I think it’s great that people seem more optimistic about getting out of debt – the more positive motivation all of us can have, the better we’ll do!

  4. I complete agree with you. On average, Canadians believe they will be debt-free by age 55, according to a CIBC survey. However, only one-third of respondents in the 55-to-64 age group have actually managed to repay their loans. A separate poll by ING Direct found that 46% of Canadians say saving money is more difficult today that it was a couple of years ago, with almost a third saying that they are nowhere near reaching their 2011 financial goals eight months into the year.
    Jennifer Goldblum

  5. Debt free and loving it. We are thirty four and debt free. It all comes down to choices. Yes we do have kids and yes we own our detached house. We do have two vehicles both of which were bought used, three years minimum. We now live as a single income family saving or should I say investing thirty percent of our gross income. Then again we don’t do the big vacations we buy what we can used and always ask our service providers if they have a better deal that could save us money. We budget as much as possible and no coupons. Debt is not a lifestyle that suits us. It just means you pay more for the same thing you could of bought with cash at a later date. I just wish governments learned to operate within their means. I wish everyone had to have their net worth hover over their heads to clearly show what they have. Maybe then the Jones’s wouldn’t be so appealing when you see the negative red number above their head with the big house and fancy car and jet set vacations.

  6. It’s quite a feat that 23% of Canadians are debt free. Depending on how accurate this stat is, it’s still very impressive and that a popular Canadian goal it become debt free. Whit citizens of other nations also want to become debt free, it’s a major challenge and becomes as big of a commitment as cutting back on unhealthy foods in your diet.

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